Rising interest rates are driving a shift in the market, with affordable houses now experiencing stronger price growth than luxury homes.
Ray White Chief Economist, Nerida Conisbee, said this change reflects growing “mortgage fatigue” among luxury homeowners who face higher repayments.
“The traditional outperformance of luxury homes in the real estate market is being challenged by current data showing more substantial price increases in affordable properties,” Ms Conisbee said.
“Rising interest rates disproportionately impact owners of expensive homes due to their larger mortgages and higher monthly payments.”
Ms Conisbee said established properties in the affordable segment are attracting increased buyer interest.
“The widening cost gap between newly built homes and existing homes has further influenced buyer behaviour,” she said.
“Established properties in this category are seeing heightened interest due to their relative affordability and location in developed neighbourhoods.”
However, the apartment market shows a different trend, with luxury units outperforming affordable options.
“This disparity is primarily driven by downsizers, typically older homeowners or retirees, who are less sensitive to interest rate changes due to their substantial equity or ability to make cash purchases,” Ms Conisbee said.
“These buyers are often willing to pay premium prices for spacious, high-quality apartments that offer comfort and convenience.”
Perth has emerged as a standout market for affordable housing growth, Ms Conisbee said.
“Suburbs like Kelmscott are recording impressive gains of over 34 per cent in the past year,” she said.
“Even in relatively flat markets like Darwin, certain areas are bucking the trend, with Weddell seeing a 6 per cent increase in house prices, making it the cheapest fast-growing suburb for houses nationwide.”
